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CMA Intermediate · Financial Management and Business Data Analytics · Management of Cash and Cash Equivalents

A treasury analyst at Sagar Exports plots daily closing cash balances for the past 12 months and notices a sharp spike every month-end followed by a fall in the first week. Which cash-management motive is this pattern most directly linked to, and what analytic step best confirms it?

Transactions motive, confirmed by comparing the balances with the monthly payroll and vendor payment schedule. A regular month-end pattern reflects predictable operating payments and receipts, so aligning it with the payment calendar tests the link. Deleting the spikes as outliers would hide a genuine recurring cash pattern.

  1. ASpeculative motive; compute the correlation of cash with share prices
  2. BTransactions motive; compare balances with the monthly payroll and vendor payment scheduleCorrect
  3. CCompensation motive; compute the median balance for the year
  4. DPrecautionary motive; remove the spikes as outliers

Explanation

Regular, predictable cycles of inflow and outflow point to the transactions motive, as salaries and supplier payments fall at fixed dates. Matching the balances against the payment calendar tests this directly. Removing the spikes as outliers would discard a genuine seasonal pattern, so the precautionary option is wrong.

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